ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this “Agreement”) is entered into as of April 27, 2007, by and between MVP GROUP INTERNATIONAL, INC., a Kentucky corporation (“Buyer”), CANDLE CORPORATION OF AMERICA, a New York corporation (“Seller”), and, solely for purposes of Section 8(h), Blyth, Inc., a Delaware corporation (“Blyth”). Buyer and Seller are referred to collectively herein as the “Parties.”
WHEREAS, Buyer desires to purchase from Seller certain assets used in (and assume certain of the liabilities of Seller related to) the Blyth Homescents International mass merchandiser candle and pot pourri business conducted under the trademarks “Carolina”, “Kate’s Original Recipe” and “Florasense” (the “Business”); and
WHEREAS, Seller desires to sell to Buyer such assets and assign to Buyer such liabilities.
Now, therefore, in consideration of the foregoing premises and the mutual promises herein made and the representations, warranties and covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows.
Section 1. Definitions.
“Acquired Assets” means all of Seller’s right, title, and interest in and to the following, and only the following, specified assets:
(a) the Leased Real Property;
(b) the Acquired Bentonville Assets;
(c) the Acquired Memphis Assets;
(d) the Assumed Purchase Orders;
(e) the Acquired Receivables;
(f) the Acquired Contracts;
(g) the Acquired Intellectual Property;
(h) the Acquired Inventory; and
(i) the Acquired Rights.
provided, however, that the term “Acquired Assets” shall not include any of the Excluded Assets.
“Acquired Bentonville Assets” means all of the tangible assets of Seller that are used to operate the Bentonville Facility.
“Acquired Contracts” means the agreements, contracts, leases, subleases and other similar arrangements (in each case, whether written or oral), and rights thereunder listed on Schedule 1A.
“Acquired Intellectual Property” means (i) the Intellectual Property listed on Schedule 1B, provided, that, to the extent that Seller uses any unregistered trademarks or fragrance names in connection with the Business that are not listed on Schedule 1B, such unregistered trademarks or fragrance names shall be Acquired Intellectual Property unless expressly excluded on Schedule 3 (Excluded Assets) and (ii) the copyright or other proprietary right embodied in any original works of authorship either created by Seller or for which Seller has obtained the intellectual property rights and which are transferred into Buyer’s physical possession pursuant hereto.
“Acquired Inventory” means the finished goods inventory of the Business listed on Exhibits INV 2.0 and 3.0 to the Closing Date Net Asset Value Statement, which includes current and active inventory and inventories related to the Assumed Purchase Orders, but excludes excess and obsolete inventory and raw material inventory.
“Acquired Memphis Assets” means the tangible assets listed on Exhibits PPE and CIP to the Closing Date Net Asset Value Statement.
“Acquired Receivables” means the accounts, notes, and other receivables listed on Exhibits AR 1.0 and AR 1.1 to the Closing Date Net Asset Value Statement after deduction of the Sterno-related accounts, notes and other receivables listed in Exhibits AR 2.0 and AR 2.1 to the Closing Date Net Asset Value Statement (without duplication).
“Acquired Rights” means all rights of Seller arising on or after the Closing Date associated with the Acquired Contracts and all rights of Seller associated with the Acquired Receivables.
“Additional Assurances” has the meaning set forth in Section 10(o) below.
“Adverse Consequences” means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable amounts paid in settlement, liabilities, obligations, taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys’ fees and expenses.
“Affiliate” has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act.
“Agent” has the meaning set forth in Section 10(d) below.
“Assumed Accounts Payable” means the accounts payable listed on Exhibits AP 1.0, AP 2.0, AP 3.0 and AP 4.0 to the Closing Date Net Asset Value Statement.
“Assumed Accrued Expenses” means the accrued expenses listed on Exhibits AE, AE 1.0 and AE 2.0 to the Closing Date Net Asset Value Statement.
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“Assumed Liabilities” means the following, and only the following, liabilities of the Seller:
(a) the Assumed Accounts Payable;
(b) the Assumed Purchase Orders;
(c) the Assumed Accrued Expenses;
(d) all obligations of Seller under the Acquired Contracts arising or accruing on or after the Closing Date;
(e) all obligations of Seller under the Leases arising or accruing on or after the Closing Date;
(f) all obligations arising out of Buyer’s operation of the Bentonville Facility on or after the Closing Date; and
(g) all obligations arising out of Buyer’s operation of the Memphis Facility on or after the Closing Date;
provided, however, that the term “Assumed Liabilities” shall not include any of the Excluded Liabilities.
“Assumed Purchase Orders” means the open inventory purchase orders related to the Business as of 11:59 p.m., New York City time on the Closing Date to be listed on the updated Schedule 2 to be delivered pursuant to Section 2(g)(i), below.
“Bentonville Facility” means the office facility of Seller located at 210 North Walton Blvd, Suite 21/22, Bentonville, Arkansas.
“Blocked Account” has the meaning set forth in Section 10(e) below.
“Business” has the meaning set forth in the preface above.
“Buyer” has the meaning set forth in the preface above.
“Buyer Closing Date Net Asset Value Statement” has the meaning set forth in Section 2(g) below.
“Cash” means cash and cash equivalents (including marketable securities and short-term investments).
“CERCLA” has the meaning set forth in Section 3(n) below.
“Closing” has the meaning set forth in Section 2(d) below.
“Closing Date” has the meaning set forth in Section 2(d) below.
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“Closing Date Net Asset Value” means the Net Asset Value, as of 11:59 p.m., New York City time, on the Closing Date.
“Closing Date Net Asset Value Statement” has the meaning set forth in Section 2(g) below; provided, however, that pending delivery of the Closing Date Net Asset Value Statement as provided in such Section 2(g), the term Closing Date Net Asset Value Statement shall mean Exhibit C attached hereto, except that, to the extent that any of the assets and liabilities shown on such Exhibit C have changed between the Financial Statement Date and the Closing Date, such Exhibit C shall be deemed to be adjusted to reflect such changes in the assets and liabilities shown thereon during the period from the Financial Statement Date to and including the Closing Date.
“Code” means the Internal Revenue Code of 1986, as amended.
“Confidentiality Agreement” means that certain Confidentiality Agreement dated July 11, 2006 by and between the Buyer and Blyth.
“Confidential Information” has the meaning ascribed to such term in the Confidentiality Agreement.
“Disclosure Schedule” has the meaning set forth in Section 3 below.
“Environmental, Health, and Safety Requirements” means all federal, state, local, and foreign statutes, regulations, ordinances, and similar provisions having the force or effect of law, all judicial and administrative orders and determinations, and all common law concerning public health and safety, worker health and safety, and pollution or protection of the environment, including all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control, or cleanup of any hazardous materials, substances, or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise, or radiation.
“Excluded Assets” means (i) the Excluded Inventory and (ii) the assets of the Seller that are listed on Schedule 3.
“Excluded Inventory” means the raw material inventory of the Business listed on Exhibit INV 1.0 to the Closing Date Net Asset Value Statement.
“Excluded Liabilities” means any liability or obligation of Seller other than those set forth in the definition of “Assumed Liabilities”, including: (a) any liability arising out of or relating to the operation of the Business by Seller or Seller’s leasing, ownership or operating of real property (other than any such operation or leasing for or on behalf of Buyer pursuant to the Transition Services Agreement), including any liability relating to products manufactured or distributed by or for the Seller; (b) any liability under any Acquired Contract that arises out of or relates to any breach of such Acquired Contract that occurred prior to the Closing Date; (c) any liability of Seller or any of Seller’s Affiliates for Taxes, including any liability of Seller or any of Seller’s Affiliates for Taxes as a result of Seller’s operation of the Business or Taxes payable by Seller or any of Seller’s Affiliates that will arise as a result of the sale of the Assets pursuant to
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this Agreement; (d) any liability of Seller or any of Seller’s Affiliates that is not an Assumed Accrued Expense and that relates to payroll, vacation, sick leave, workers’ compensation, unemployment benefits, pension benefits, health care plans or benefits or other employee plans or benefits of any kind for Seller’s employees or former employees or both, in every case arising out of and relating to Seller’s employment of such employees or former employees and including any liability of Seller under any employment, severance, retention or termination agreement with any employee of Seller or any of Seller’s Affiliates; (e) any liability of Seller under this Agreement or other document executed in connection with the transactions contemplated hereby; and (f) any liability of Seller based upon Seller’s acts or omissions occurring after the Closing.
“Final Closing Date Net Asset Value” has the meaning set forth in Section 2(g) below.
“Financial Statement Date” means March 24, 2007.
“GAAP” means United States generally accepted accounting principles as in effect from time to time, consistently applied.
“Guaranty” has the meaning set forth in Section 6(e) below.
“Improvements” has the meaning set forth in Section 3(h) below.
“Indemnified Party” has the meaning set forth in Section 8(d) below.
“Indemnifying Party” has the meaning set forth in Section 8(d) below.
“Intellectual Property” means: (a) inventions (whether patentable or unpatentable and whether or not reduced to practice), improvements thereto, and patents, patent applications, and patent disclosures, together with reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations thereof, (b) trademarks, service marks, trade dress, logos, slogans, trade names, Internet domain names and telephone numbers, together with translations, adaptations, derivations, and combinations thereof and including goodwill associated therewith, and applications, registrations, and renewals in connection therewith, (c) websites, graphics, designs, labels, packaging and other copyrightable works, copyrights, and applications, registrations, and renewals in connection therewith, (d) product specifications, formulations, trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (e) computer software (including source code, executable code, data, databases, and related documentation), (f) advertising and promotional materials, (g) other proprietary rights, and (h) copies and tangible embodiments thereof (in whatever form or medium).
“Key Customers” means the Persons identified as customers in the Sales Figures.
“Knowledge” means actual knowledge of Charles Leichtweis, Steven Kosmalski, or Robert B. Goergen, Jr. after reasonable investigation.
“Lease Consent” has the meaning set forth in Section 7(a) below.
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“Leased Real Property” means the real property leased by Seller and located at 210 North Walton Blvd, Suite 21/22, Bentonville, Arkansas and 6100 Holmes Road, Memphis, Tennessee.
“Leases” means the lease agreements or other contracts, including all amendments, extensions, renewals, guaranties, and other agreements with respect thereto, pursuant to which Seller holds any interest in any Leased Real Property.
“Lenders” has the meaning set forth in Section 10(d) below.
“Lien” means any mortgage, pledge, lien, right of way, easement, encroachment, encumbrance, charge, claim or other security interest or restriction on use other than (a) liens for Taxes not yet due and payable or for Taxes that the taxpayer is contesting in good faith through appropriate proceedings and as to which appropriate reserves have been established and (b) purchase money liens and liens securing rental payments under capital lease arrangements.
“Material Adverse Effect” means any effect that would be materially adverse to the ability of any Party to consummate timely the transactions contemplated hereby in accordance with the terms set forth herein.
“Memphis Facility” means Seller’s distribution center located at 6100 Holmes Road, Memphis, Tennessee.
“Net Asset Value” means the difference between (a) the sum of the values of the Acquired Inventory, the Acquired Receivables, and the Acquired Memphis Assets less (b) the amount of the Assumed Accounts Payable and the Assumed Accrued Expenses, in each case determined in accordance with the Seller’s Past Practice.
“Net Asset Value Adjustment” means the adjustment to the Purchase Price provided for in Section 2(g).
“New Employees” has the meaning set forth in Section 3(t) below.
“Ordinary Course of Business” means the ordinary course of the Seller’s business as presently conducted it being understood and agreed that the Seller and certain of its Affiliates are currently undertaking a restructuring of the North American wholesale mass home fragrance business conducted by Seller and such Affiliates (including the Business) with the effect, among other things, of reducing the size and scope of such business, and reducing the aggregate income of such business, and that all action(s) taken in connection with such restructuring are, and for purposes of this Agreement shall be deemed to be, in the ordinary course of the Seller’s Business.
“Overstock Inventory Agreement” means the agreement to be entered into on the date hereof by and between Buyer and Seller regarding the transfer to Buyer by Seller of certain overstock inventory of Seller related to the Business, the sale of such overstock inventory by Buyer and the division of revenues from such sales, substantially in the form of Exhibit G hereto.
“Party” has the meaning set forth in the preface above.
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“Patent License Agreement” means the Patent License Agreement to be entered into by and between Buyer and Seller, substantially in the form of Exhibit H hereto.
“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, any other business entity or a governmental entity (or any department, agency, or political subdivision thereof).
“Projections” has the meaning set forth in Section 3(f) below.
“Purchase Price” has the meaning set forth in Section 2(c) below.
“Real Property Laws” has the meaning set forth in Section 3(h) below.
“Release of Guaranty” has the meaning set forth in Section 6(e) below.
“Restricted Business” means selling Restricted Products in the Restricted Territories.
“Restricted Customers” means Albertson’s, Big Lots, Boscovs, Dollar General, Family Dollar, Fred Meyer, HEB, Kohls, Kroger, Longs, Michaels Stores, Publix, Rite Aid, Ross, Stein Mart, TJX Corp., Value City Dept., and Wal-Mart.
“Restricted Products” means candles, private label liquid or dry pot pourri and private label incense.
“Restricted Territories” has the meaning set forth in Section 6(c) below.
“Sales Figures” has the meaning set forth in Section 3(f) below.
“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Selected Financial Data” has the meaning set forth in Section 3(f) below.
“Seller’s Past Practice” means the practices and procedures (including, with respect to assumptions and estimates and methods of valuation of inventory) used by Seller in the Ordinary Course of Business in valuing assets and liabilities of the Seller for purposes of preparing financial statements of the Seller in accordance with GAAP, which practices and procedures have been disclosed to Buyer insofar as they relate to the valuation of the assets and liabilities of the Seller that are included in the Net Asset Value.
“Seller” has the meaning set forth in the preface above.
“Tax” or “Taxes” means any federal, state, local, or foreign taxes, charges, fees, imposts or other assessments, including those related to income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code §59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any
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kind whatsoever, whether computed on a separate or consolidated, unitary or combined basis or in any other manner, including any interest, penalty, or addition thereto, whether disputed or not.
“Tax Benefit” has the meaning set forth in Section 8(e) below.
“Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
“Third-Party Claim” has the meaning set forth in Section 8(d) below.
“Trademark License Agreement” means the Trademark License Agreement to be entered into by and between Buyer and Seller, substantially in the form of Exhibit I hereto.
“Transaction Documents” has the meaning set forth in Section 3(b) below.
“Transition Services Agreement” means the Transition Services Agreement to be entered into by and between Buyer and Seller, substantially in the form of Exhibit D hereto.
Section 2. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and conditions of this Agreement, Buyer agrees to purchase from Seller, and Seller agrees to sell, transfer, convey, and deliver to Buyer, all of the Acquired Assets at the Closing for the consideration specified below in this Section 2.
(b) Assumption of Liabilities. On and subject to the terms and conditions of this Agreement, Buyer agrees to assume and become responsible for all of the Assumed Liabilities at the Closing. Buyer will not assume or have any responsibility, however, with respect to any other obligation or liability of Seller not included within the definition of Assumed Liabilities.
(c) Purchase Price. The Buyer agrees to pay to the Seller $21,830,000 (the “Purchase Price”), by delivery of cash, payable by wire transfer or delivery of other immediately available funds. The Purchase Price is subject to adjustment as provided in Section 2(g) below.
(d) The Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Nelson Mullins Riley & Scarborough LLP, in Atlanta, Georgia, commencing at 10:00 a.m. local time on the date hereof (the “Closing Date”) and the effective time of the Closing shall be 11:59 p.m. New York City time on the Closing Date;
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(o) Legal Compliance. Seller has complied in all material respects with all applicable laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder and including the Foreign Corrupt Practices Act, 15 U.S.C. 78dd-1, et seq.) of federal, state, local, and foreign governments (and all agencies thereof), and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against any of them alleging any failure so to comply.
(p) Tax Matters.
(i) Seller has filed all material Tax Returns that it was required to file. All such Tax Returns were correct and complete in all material respects. All material Taxes owed by Seller (whether or not shown on any Tax Return) have been paid. Seller is not currently the beneficiary of any extension of time within which to file any income Tax Return. Seller has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party, and all Forms W-2 and 1099 required with respect thereto have been properly completed and timely filed.
(ii) There is no material dispute or claim concerning any Tax liability of Seller either: (A) claimed or raised by any authority in writing; or (B) as to which Seller has Knowledge.
(q) Litigation. Section 3(q) of the Disclosure Schedule sets forth each instance in which Seller: (i) is subject to any outstanding injunction, judgment, order, decree, ruling, or charge; or (ii) is a party or, to the Knowledge of Seller, is threatened to be made a party to any action, suit, proceeding, hearing, or investigation of, in, or before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator, in either case, affecting the Business or the Acquired Assets.
(r) Product Warranty; Product Liability.
(i) Substantially all of the products manufactured, sold, leased, and delivered by Seller in the operation of the Business have conformed in all material respects with all applicable contractual commitments and all express and implied warranties, and Seller has no material liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due) for replacement or repair thereof or other damages in connection therewith.
(ii) Seller has no material liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due) arising out of any injury to individuals or property as a result of the ownership, possession, or use of any product manufactured, sold, leased, or delivered by Seller in its operation of that portion of the Business conducted with the Acquired Assets.
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(s) Solvency. Seller is not now insolvent and will not be rendered insolvent by any of the transactions contemplated hereby. As used in this Section 3(s), “insolvent” means that the sum of the debts and other probable liabilities of Seller exceed the present fair saleable value of Seller’s assets.
(t) Employees. Section 3(t)(i) of the Disclosure Schedule sets forth the name, annual salary for the fiscal year ended January 31, 2007, bonus paid in respect of fiscal year ended January 31, 2007, hiring date and accrued vacation for each of the employees to be offered employment by Buyer (the “New Employees”). None of the New Employees has received any raise or compensation in the last 6 months except in the Ordinary Course of Business. Seller is not nor has it been in a material dispute with any of the New Employees, and, to the Knowledge of Seller, Seller has no reason to believe that any New Employee will not accept employment with Buyer.
(ii) Section 3(t)(ii) of the Disclosure Schedules sets forth a list of all workers’ compensation claims filed against Seller or any of its Affiliates from January 1, 2000 through April 20, 2007 by any New Employee.
(u) Accounts Payable. The Assumed Accounts Payable are related solely to the Business and were incurred in the Ordinary Course of Business.
(v) Acquired Assets. The Acquired Assets, in conjunction with the Excluded Assets, certain Intellectual Property to be licensed by Seller to Buyer pursuant to the Patent License Agreement and certain assets to be made available by Seller to Buyer pursuant to the Transition Services Agreement, constitute all of the material assets that are currently utilized by the Seller to operate that portion of the Business conducted by Seller with the assets being purchased by Buyer.
Section 4. Buyer’s Representations and Warranties. Buyer represents and warrants to Seller that the statements contained in this Section 4 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 4).
(a) Organization of Buyer. Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation, with full corporate power and authority to conduct its business as now being conducted by it and to own and use the properties it purports to own and use.
(b) Ownership of Buyer. As of the date hereof, all issued and outstanding shares of capital stock of the Buyer are held by the persons and in the amounts set forth in Section 4(b) of the Disclosure Schedule.
(c) Authorization of Transaction. Buyer has full corporate power and authority to execute and deliver the Transaction Documents and to perform its obligations thereunder. This Agreement constitutes, and the other Transaction Documents when executed will constitute, the valid and legally binding obligation of Buyer, enforceable against it in accordance with its
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terms and conditions. The execution, delivery and performance of the Transaction Documents have been duly authorized by Buyer.
(d) Non-contravention. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby (including the assignments and assumptions referred to in Section 2 above), will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which Buyer is subject or any provision of its charter or bylaws or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which Buyer is a party or by which it is bound or to which any of its assets are subject, except where the violation, conflict, breach, default, acceleration, termination, modification, cancellation, failure to give notice, or Lien would not have a Material Adverse Effect. Buyer does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by this Agreement (including the assignments and assumptions referred to in Section 2 above), except where the failure to give notice, to file, or to obtain any authorization, consent, or approval would not have a Material Adverse Effect.
(e) Brokers’ Fees. Buyer has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which Seller could become liable or obligated.
Section 5. [RESERVED]
Section 6. Post-Closing Covenants. The Parties agree as follows with respect to the period following the Closing:
(a) General. Each Party shall, at the request of any other Party from time to time and at any time, whether on or after the Closing Date, and without further consideration, execute and deliver such deeds, assignments, transfers, assumptions, conveyances, powers of attorney, receipts, acknowledgments, acceptances and assurances as may be reasonably necessary to procure for the Party so requesting, and its successors and assigns, or for aiding and assisting in collecting and reducing to possession, any and all of the Acquired Assets, or for the assumption of the Assumed Liabilities, or to otherwise satisfy and perform the obligations of the Parties hereunder. Without limiting the generality of the foregoing, Seller shall, upon the request of Buyer, in a timely manner on and after the Closing Date execute and deliver to Buyer such other documents, releases, assignments and other instruments as may be reasonably required to effectuate completely the transfer and assignment to Buyer of, and to vest fully in Buyer, Seller’s rights to, the Acquired Assets. In furtherance of the foregoing, Seller shall accumulate weekly the proceeds of any Acquired Receivables received by it and such proceeds shall be remitted to Buyer no later than the third business day following the last day of the week in which received and shall be held in trust for the benefit of Buyer until so remitted.
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(b) Transition. Seller will not take any action that is designed to or could reasonably be anticipated to discourage any lessor, licensor, customer, supplier, or other business associate of Seller from maintaining the same business relationships with Buyer after the Closing as it maintained with Seller prior to the Closing. Seller will promptly forward to Buyer any amounts received in respect of any Acquired Receivable.
(c) Non-Competition.
(i) In consideration of the Purchase Price and the assumption by Buyer of the Assumed Liabilities, for a period of five (5) years from the Closing Date (the “Restricted Period”), Seller and its Affiliates shall not, except as provided in Section 6(c)(v), below, sell in the United States or its territories, Mexico or Canada (the “Restricted Territories”) Restricted Products to the Restricted Customers.
(ii) During the Restricted Period, Seller and its Affiliates shall not, directly or indirectly through another entity, (x) induce or attempt to induce any customer to cease doing Restricted Business with Buyer or any of its Affiliates, (y) induce or attempt to induce any supplier, licensee, licensor, franchisee or other business relation of Buyer or any of its Affiliates to terminate its Restricted Business related relationship with Buyer or such Affiliate or (z) interfere with the Restricted Business related relationship between Buyer and/or such Affiliate and any such customer, supplier, licensor, licensee or franchisee (including by making any negative statements or communications to such customer, supplier, licensor, licensee or franchisee about the Restricted Business of Buyer or such Affiliates) with the goal of disrupting such Restricted Business related relationship;
(iii) During the Restricted Period, Seller and its Affiliates shall not, directly or indirectly through another entity, solicit, induce or conspire with or attempt to solicit, induce or conspire with any employee or officer of Buyer or any of its Affiliates to leave the employ of Buyer or any of its Affiliates, or to compete in the Restricted Business against the Buyer or any of its Affiliates or interfere with the employment relationship between Buyer or any of its Affiliates and any employee or officer of Buyer or such Affiliate(s) in any way that is adverse to such employment relationship;
(iv) During the Restricted Period, Seller and its Affiliates shall not divert or attempt to divert any or all of the Restricted Business of Buyer’s or any of Buyer’s Affiliate’s customers or suppliers from Buyer or its Affiliates in violation of this Agreement or applicable law (including any applicable trade secrets law).
(v) Notwithstanding anything to the contrary contained in this Agreement, Seller and its Affiliates shall be entitled to sell, and shall not be restricted in any way from selling, to any Person and whether in the Restricted Territories or otherwise:
(A) Non-fragranced candles and non-candle products under the brand names Sterno®, Ambria® or Handy Fuel®;
(B) candles and candle-related products to customers other than Wal-Mart where such candles and candle-related products do not constitute more than
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10% of the aggregate sales by Seller and/or its Affiliates to customers other than Wal-Mart; and
(C) candles and candle products sold to customers other than Wal-Mart under the brand name Colonial Candle™ or any related brand name.
(vi) The covenants in this Section 6(c) are severable and separate, and the unenforceability of any specific covenant in this Section 6(c) is not intended by any Party to, and shall not, affect the provisions of any other covenant in this Section 6(c). If any court of competent jurisdiction shall determine that the scope, time, or territorial restrictions set forth in this Section 6(c) are unreasonable as applied to Seller, the Parties acknowledge their mutual intention and agreement that those restrictions be enforced to the fullest extent the court deems reasonable, and that they thereby shall be reformed to that extent as applied to Seller.
(vii) All of the covenants in this Section 6(c) are intended by each Party hereto to be, and shall be construed as, an agreement independent of any other provision in this Agreement and the existence of any claim or cause of action of Seller against Buyer, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by Buyer of any covenant in this Section 6(c). It is specifically agreed that the time periods specified in Section 6(c)(i) shall be computed by excluding from that computation any time during which Seller has been found by a court of competent jurisdiction to have been in violation of any provision of Section 6(c)(i).
(viii) Buyer and Seller hereby agree that this Section 6(c) is a material and substantial part of this Agreement, and absent Seller agreeing to be bound by this Section 6(c), Buyer would not have consummated the Acquisition.
(ix) The parties hereto agree that money damages would not necessarily be an adequate remedy for any breach of this Section 6(c). Because of the difficulty in measuring the economic losses that may be incurred by Buyer as a result of any breach by Seller of the covenants in this Section 6(c) and because of the immediate and irreparable damage that could be caused to Buyer for which it would have no other adequate remedy, Seller agrees that Buyer may enforce the provisions of this Section 6(c) by any equitable or legal means, including seeking an appropriate injunction or restraining order against Seller if a breach of any of those provisions occurs. Therefore, in the event of a breach or threatened breach of this Section 6(c), Buyer or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief (temporary and/or permanent), in order to enforce, or prevent any violations of, the provisions hereof.
(x) Notwithstanding anything to the contrary contained in this Agreement:
(A) nothing in this Agreement shall or shall be deemed to prohibit the running by Seller or any of Seller’s Affiliates of general advertisements, not specifically addressed to Buyer or its Affiliates, offering employment or the hiring of any person who responds to any such general advertisement; and
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(B) neither Seller nor any of its Affiliates shall be restricted from owning, and each shall be entitled to be the owner of, not more than five percent (5%) of the outstanding securities of any class of an entity, whether engaged in the Restricted Business or not, which is publicly traded, so long as Seller has no active participation in the business of such entity.
(d) Preservation of Records. Seller shall preserve and keep copies of all data (to the extent not physically transferred to the Buyer at or after the Closing, with the Memphis Facility or otherwise) related to that portion of the Business conducted with the Acquired Assets, including customer lists, referral sources, research and development reports, production reports, any performance testing results on products, service and warranty records, financial and accounting records, creative materials, advertising materials, promotional materials, correspondence and other similar documents for a period of five (5) years from the Closing Date and shall make such documents available to Buyer as may be reasonably required by Buyer in connection with, among other things, the conduct by the Buyer of the Business conducted with the Acquired Assets and shall permit Buyer to make and keep copies of such records, at Seller’s sole cost and expense. In addition, Seller shall, and shall cause its Affiliates to, preserve and keep the financial records held by it relating to the Business for a period of three (3) years from the Closing Date and shall make such records available to Buyer as may be reasonably required by Buyer in connection with, among other things, the conduct by the Buyer of the Business conducted with the Acquired Assets, any insurance claims, governmental investigations, or securities offerings and shall permit Buyer to make and keep copies of such records, at Buyer’s sole cost and expense.
(e) Release of Guaranty. Buyer will use commercially reasonable efforts to cooperate with Seller in obtaining a release (the “Release of Guaranty”) of the guaranty of Blyth of the obligations of Seller under the Lease with respect to the Memphis Facility (the “Guaranty”). Without limiting the foregoing, as soon as practicable and, in any event, no later than thirty (30) days from the Closing Date, Buyer shall obtain or provide to the landlord under the Lease with respect to the Memphis Facility a letter of credit or other credit enhancement acceptable to such landlord and Buyer as security for Buyer’s performance under the lease and in substitution for the Guaranty.
(f) Wal-Mart Relationship. Seller shall cooperate with the Buyer, and the Buyer shall cooperate with the Seller, in endeavoring to ensure that the customer relationship, with respect to the Business only, of Seller with Wal-Mart shall transfer to Buyer from and after the Closing. Without limiting the generality of the foregoing, (i) Buyer shall take reasonable steps to assure Wal-Mart that Buyer shall be, and shall continue to be, able to service the customer relationship with Wal-Mart including, without limitation, through the continued maintenance and operation of the Memphis Facility and the Bentonville Facility, supporting radio frequency identification (RFID) programs and maintenance of existing service levels and receivables terms; and (ii) Buyer and Seller shall cooperate in making such presentations to Wal-Mart as are necessary or advisable to facilitate the transfer of the aforedescribed customer relationship with Wal-Mart from Seller to Buyer, including, without limitation, by making appropriate personnel available and providing available data to the extent not subject to conflicting confidentiality agreements or requirements.
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(g) Employee Matters. No later than five (5) business days after the Closing, Buyer shall (A) offer employment on an at-will basis, to those persons listed in Section 6(g)(A) of the Disclosure Schedule, such offer of employment to be on terms that are comparable to those upon which such persons were, immediately prior to the Closing, employed by Seller including, without limitation, as to compensation and benefits (it being understood and agreed that the provisions of this Section 6(g) are not for the benefit of any of the persons listed in Section 6(g)(A) of the Disclosure Schedule and shall not, and shall not be construed to, give or vest in any of such persons any right or entitlement to employment or continued employment or to a particular level of compensation or benefits with or from either Seller or Buyer) and (B) make appropriate arrangements to transition those persons set forth on Section 6(g)(A) and Section 6(g)(B) of the Disclosure Schedule who have been offered and accepted employment with the Buyer to the payroll accounting and other human resources systems of Buyer and to Buyer’s benefit plans. Seller agrees that, after Closing, Buyer may, but shall not be required to, offer employment, on an at-will basis, to those persons listed in Section 6(g)(B) of the Disclosure Schedule. Buyer acknowledges and agrees that, in the event that Buyer does not, for any reason, offer employment to any of the persons listed in Section 6(g)(A) or Section 6(g)(B) of the Disclosure Schedule, Seller may, but shall not be required to, retain any of such persons as employees of Seller and utilize any of such persons to provide services to Buyer pursuant to the Transition Services Agreement, including, without limitation, services set forth on Exhibit A thereto, in which event Buyer shall pay to Seller the consideration provided for in, and in the manner provided in, Section 4.1 of the Transition Services Agreement, which consideration shall be in addition to the consideration specified in Exhibit A to the Transition Services Agreement and shall be calculated taking into account stay bonuses or other incentives, if any, paid or provided by Seller to any or all of such persons so retained. Seller agrees that any such stay bonuses or other incentives, if any, will be calculated and determined in a manner consistent with the manner in which stay bonuses currently set forth on Exhibit A to the Transition Services Agreement were determined.
Section 7. Conditions to Obligation to Close.
(a) Conditions to Buyer’s Obligation. The obligation of Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3 above shall be true and correct in all material respects (except for those representations and warranties qualified by “material,” which shall be true and correct in all respects) at and as of the Closing Date;
(ii) Seller shall have performed and complied with all of its covenants hereunder in all material respects (other than those covenants contained in Section 2(e) which shall have been complied with in all respects) through the Closing;
(iii) no action, suit, or proceeding shall be pending before (or that could come before) any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before (or that could come before) any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of
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the transactions contemplated by this Agreement, (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation or (C) adversely affect the right of Buyer to own the Acquired Assets (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect);
(iv) Seller shall have delivered to Buyer a certificate, executed by an authorized officer of Seller, to the effect that each of the conditions specified above in Section 7(a)(i)-(iii) is satisfied in all respects;
(v) the Buyer and the Seller shall have entered into each of the Transition Services Agreement, Patent License Agreement, the Overstock Inventory Agreement and the Trademark License Agreement and all of the same shall be in full force and effect;
(vi) Buyer shall have received from counsel to Seller an opinion in form and substance as set forth in Exhibit E attached hereto, addressed to Buyer and on which Buyer’s lenders shall be entitled to rely, and dated as of the Closing Date;
(vii) all actions to be taken by Seller in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to Buyer;
(viii) Seller shall have obtained and delivered to Buyer a written consent for the assignment of the Lease for the Memphis Facility (the “Lease Consent”), in form and substance reasonably satisfactory to Buyer;
(ix) no damage or destruction or other change shall have occurred with respect to any of the Leased Real Property or any portion thereof that, individually or in the aggregate, would materially impair the use or occupancy of the Leased Real Property;
(x) Buyer shall have obtained financing in form and substance reasonably satisfactory to it and its counsel, necessary to consummate the transactions contemplated hereby and the conditions precedent to such financing shall have been satisfied; and
(xi) Buyer shall have had substantive diligence discussions with Wal-Mart regarding Wal-Mart’s relationship with Seller and its continued relationship with Buyer, and Wal-Mart shall not have advised Buyer that it intends to adversely change the relationship between Wal-Mart, on the one hand, and Buyer and Buyer’s Wal-Mart relationship management team, on the other, from that currently in existence between Wal-Mart, on the one hand, and Seller and Seller’s Wal-Mart relationship management team, on the other.
Buyer may waive any condition specified in this Section 7(a) if it executes a writing so stating at or prior to the Closing.
(b) Conditions to Seller’s Obligation. The obligation of Seller to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions:
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(i) the representations and warranties set forth in Section 4 above shall be true and correct in all material respects (except for those representations and warranties qualified by “material,” which shall be true and correct in all respects) at and as of the Closing Date;
(ii) Buyer shall have performed and complied with all of its covenants hereunder in all material respects (other than those covenants contained in Section 2(e) which shall have been complied with in all respects) through the Closing;
(iii) no action, suit, or proceeding shall be pending before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement or (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect);
(iv) Buyer shall have delivered to Seller a certificate, executed by an authorized officer of Buyer, to the effect that each of the conditions specified above in Section 7(b)(i)-(iii) is satisfied in all respects;
(v) Seller and Buyer shall have received all material authorizations, consents, and approvals of governments and governmental agencies referred to in Section 3(c) and Section 4(c) above;
(vi) the Buyer and the Seller shall have entered into each of the Transition Services Agreement, Patent License Agreement, the Overstock Inventory Agreement and the Trademark License Agreement and all of the same shall be in full force and effect;
(vii) Seller shall have received from counsel and local counsel to Buyer opinions in form and substance as set forth in Exhibit F attached hereto, addressed to Seller and dated as of the Closing Date;
(viii) all actions to be taken by Buyer in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to Seller;
(ix) the execution, delivery and performance of this Agreement, and all other related matters, shall have been approved by the Boards of Directors of Seller and of Blyth; and
(x) Buyer shall have paid the Purchase Price to Seller.
Seller may waive any condition specified in this Section 7(b) if it executes a writing so stating at or prior to the Closing.
Section 8. Remedies for Breaches of This Agreement.
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(a) Survival of Representations and Warranties. All of the representations and warranties of Buyer and Seller contained in this Agreement shall survive the Closing and continue in full force and effect for a period of fifteen months thereafter; provided, however, that the representations and warranties contained in: (i) Sections 3(b), 3(d) and 3(e) and Sections 4(b) and (d) shall survive the Closing and continue in full force and effect indefinitely; and (ii) Sections 3(n) and (p) shall survive the Closing and continue in full force and effect until the 90th day following the applicable statute of limitations.
(b) Indemnification Provisions for Buyer’s Benefit.
(i) In the event Seller breaches any of its representations, warranties, and covenants contained in this Agreement, and, provided that Buyer makes a written claim for indemnification against Seller pursuant to Sections 8(d) and 10(g) below within the survival period (if there is an applicable survival period pursuant to Section 8(a) above), then Seller agrees to indemnify Buyer from and against the entirety of any Adverse Consequences Buyer may suffer (including any Adverse Consequences Buyer may suffer after the end of any applicable survival period) resulting from, arising out of, relating to, in the nature of, or caused by the breach; provided, however, that (A) Seller shall not have any obligation to indemnify Buyer from and against any Adverse Consequences resulting from, arising out of, relating to, in the nature of, or caused by the breach of any representation or warranty of Seller contained in Section 3(c) or Sections 3(f)-(u) above unless and until Buyer has suffered Adverse Consequences by reason of all such breaches in excess of a $300,000 aggregate deductible (after which point Seller will be obligated only to indemnify Buyer from and against further such Adverse Consequences) and (B) (other than with respect to Seller’s representations and warranties contained in Sections 3(a), (b), (d), (e), (n) and (p) as to which the aggregate ceiling will be an amount equal to the Purchase Price), there will be a $6,000,000 aggregate ceiling on the obligation of Seller to indemnify Buyer from and against Adverse Consequences resulting from, arising out of, relating to, in the nature of, or caused by breaches of the representations and warranties of Seller.
(ii) Seller agrees to indemnify Buyer from and against the entirety of any Adverse Consequences Buyer may suffer resulting from, arising out of, relating to, in the nature of, or caused by any liability of Seller that is not an Assumed Liability, indefinitely.
(c) Indemnification Provisions for Seller’s Benefit.
(i) In the event Buyer breaches any of its representations, warranties, and covenants contained in this Agreement, and, provided that Seller makes a written claim for indemnification against Buyer pursuant to Sections 8(d) and 10(g) below within the survival period (if there is an applicable survival period pursuant to Section 8(a) above), then Buyer agrees to indemnify Seller from and against the entirety of any Adverse Consequences suffered (including any Adverse Consequences suffered after the end of any applicable survival period) resulting from, arising out of, relating to, in the nature of, or caused by the breach.
(ii) Buyer agrees to indemnify Seller from and against the entirety of any Adverse Consequences suffered resulting from, arising out of, relating to, in the nature of, or caused by any Assumed Liability.
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